Fed’s Bowman: Discount Window Use Intended for Emergencies, According to Reuters

Federal Reserve Governor Michelle Bowman addressed the Mid-size Bank Coalition of America Board of Directors Workshop on Thursday, emphasizing that the use of the Fed’s discount window should be reserved for emergency situations rather than routine liquidity needs. This perspective seems to differ from a recent initiative by banking regulators encouraging banks to utilize the discount window more frequently.

Bowman highlighted the potential downsides of borrowing from the discount window, noting that while banks should consider signing up for the facility and possibly testing it, there could be “unintended consequences” if they are compelled to provide collateral at the facility, especially when they may have other immediate demands for those resources.